Invoice Value Applies for Supply to Related Persons Eligible for ITC (Sri Lakshmi Ganesh Cement and Iron General Stores, AAR Andhra Pradesh)
Issue: To determine the correct valuation method under the Goods and Services Tax (GST) Act for goods supplied by a registered person to a related person (a firm owned by the applicant’s wife) who is eligible to claim the full Input Tax Credit (ITC) on that supply.
Facts:
The Applicant, Sri Lakshmi Ganesh Cement and Iron General Stores, is a trader selling cement and iron to both unrelated customers and a related entity, M/s Sri Lakshmi Ganesh Steels (owned by the applicant’s wife).
The Applicant sought an Advance Ruling on the value of supply for both unrelated and related party transactions.
The Applicant also sought clarity on its liability to pay GST on road transportation services provided to unregistered persons (like farmers), where no consignment note was issued.
Decision:
The Andhra Pradesh Authority for Advance Ruling (AAR) held that for supplies made to a related person who is eligible for full Input Tax Credit (ITC), the value declared in the invoice shall be deemed to be the open market value of the supply, overriding the normal valuation rules (Rule 28).
Key TakeDowns:
Related Party Valuation (Proviso to Rule 28): The AAR relied on the second proviso to Rule 28 of the CGST Rules, 2017, which dictates that where the recipient (the related person) is eligible for full ITC, the invoice value declared by the supplier is deemed to be the open market value. This greatly simplifies compliance for transactions within closely-held corporate or family groups where full ITC is available. * Unrelated Party Valuation: For unrelated persons, the value of supply is the transaction value (the price actually paid or payable), as per the standard provisions of Section 15(1).
Exemption on Transportation: The AAR held that transportation services provided by the Applicant to unregistered persons (like farmers) are exempt from GST liability under Entry 21A of Notification No. 12/2017-CT (Rate).
Goods Transport Agency (GTA) Status: The service did not qualify as a Goods Transport Agency (GTA) service because the Applicant did not issue a consignment note or assume full responsibility for the goods.